Inflation Targeting Under Imperfect Policy Credibility

• Pubblicazione: Washington, D.C. : , : International Monetary Fund, , 2009
• Descrizione fisica: 1 online resource (32 p.)
• Soggetto topico: Inflation (Finance); Fiscal policy; Inflation; Money and Monetary Policy; Economic Theory; Production and Operations Management; Price Level; Deflation; Monetary Policy; Macroeconomics: Production; Agriculture: Aggregate Supply and Demand Analysis; Prices; Macroeconomics; Monetary economics; Economic theory & philosophy; Inflation targeting; Output gap; Supply shocks; Disinflation; Monetary policy; Production; Economic theory; Supply and demand
• Soggetto geografico: United States
• Note generali: Description based upon print version of record.
• Nota di bibliografia: Includes bibliographical references.
• Nota di contenuto: Contents; I. Introduction; II. The Model; A. Inflation Process with Endogenous Credibility; A.1 Inflation equation-an expectations-augmented Phillips curve; A.2 Output Gap equation; A.3 Exchange rate-real interest rate parity equation; A.4 Monetary policy loss function; A.5 Note on calibration; III. Optimal Disinflation; A. Initial Condition; B. Disinflation Under Various Degrees of Credibility; IV. Optimal Responses to Shocks; A. Initial Conditions; B. Supply Shocks; C. Demand Shocks; V. Costs of Delaying Interest Rate Increase Under Imperfect Credibility; VI. Concluding Remarks; References ; Figures1. Disinflation with Equal Weights on Inflation, Output and Interest Rate Variability; 2. Disinflation with Lower Weights on Output and Interest Rate Variability; 3. Responses to Unfavorable and Favorable Supply Shocks (Positive Shock Circle; Negative Shock Triangle); 4. Responses to Positive and Negative Demand Shocks (Positive Shock Circle Negative Shock Triangle; 5. Cost of Delaying Interest Rate Hikes in Response to an Unfavorable Supply Shock in an Economy with High Inflation and Low Initial Credibility (No Delay Triangle; Delay Circle)
• Sommario/riassunto: This paper presents a model for Inflation Targeting under imperfect policy credibility. It modifies the conventional model in three ways: an endogenous policy credibility process, by which monetary policy can gain or lose credibility over time; non-linearities in the inflation equation and in the credibility generating process; and an explicit loss function. The model highlights problems associated with the practice of setting a series of rigid near-term inflation targets. Also, unfavorable supply shocks pose a difficult problem: an appropriate response involves an interest rate increase, some loss of output, and a period of increased inflation. A delayed response can result in a prolonged period of stagflation.
• Titolo autorizzato: Inflation Targeting Under Imperfect Policy Credibility
• ISBN: 1-4623-2348-0; 1-4527-7227-4; 1-282-84314-1; 9786612843143; 1-4518-7241-0
• Formato: Materiale a stampa
• Livello bibliografico: Monografia
• Lingua di pubblicazione: Inglese
• Record Nr.: 9910788715403321
• Lo trovi qui: Univ. Federico II
• Serie: IMF Working Papers; Working Paper ; ; No. 2009/094